For the last two years, the automotive industry has been practically upside down. When stay-at-home orders kept drivers off the roads, the pursuit of new and pre-owned cars came to a halt. Then, just as quickly as things slowed, the demand for vehicles shot up as more people moved into the suburbs or avoided public transportation.
As demand increased for automobiles, microchip production couldn’t keep up as these semiconductors were also in demand for other electronics like computers and cell phones. Since new cars couldn’t be produced fast enough, pre-owned cars became in higher demand. These forces resulted in the rise of car prices.
While we’re two years into the pandemic and some forward moves are being made, it’s still a confusing time for shoppers. Does it make more sense to shop for a new car or to look at pre-owned cars?
Here’s what you should consider:
It’s Still Early in The Recovery
Many Experts, like Michèle Krebs of Cox Automotive, believe that new car prices peaked in early 2022. The number of available new cars started to finally increase, and prices started to level off a little bit.
Even with some balance coming back to the auto industry, car prices are still near historic highs. Pre-owned car prices are almost 30% higher than they were last year. New cars are still hard to come by and come with higher prices as well.
The reality is that it’s going to take a while for things to go back to normal if that ever happens at all. The CEO of General Motors doesn’t believe that auto manufacturers will ever go back to pre-pandemic inventory levels.
Prices Will Come Down, Eventually
As vehicle supply improves, prices should come down. It’s going to be a while before new car production can meet the high demand from consumers. That means prices are going to come down slowly. The reality is that the computer chip shortage hasn’t been solved just yet, so production can’t move as fast.
Pre-owned car prices will also come down, but this move will take longer. When new cars are hard to find, shoppers have to look toward used options. Even with dealerships building up their used car inventories, demand is high enough that prices can stay up.
How To Buy a Car In This Market
If you’re looking to upgrade your ride, be ready for high prices. The good news is that your next car is likely to last you for a long time. New and recent vehicles are built with techniques, materials, and technology that help them last. Think about your next car as an investment, and that will help with the sticker shock.
If you prefer to drive something new, your best bet is to pre-order your car from your local dealership. You may have to wait a few months before your car is ready, but you’re sure to get the exact model, build, and color you want.
For shoppers who need something a little faster, pre-owned cars are still an option. You’re less likely to find an older and less-expensive vehicle, but you can find something that has plenty of life left in it. You can even find some amazing certified pre-owned vehicles that are coming back to sales lots as leases are getting turned in.
Regardless of what you’re looking for, be patient in your search. It’s also worth expanding your search both by the kind of vehicle you want and where you’ll buy it. The best bet for some shoppers is to just wait until the market improves, but it might be a while before this is the case. Until then, evaluate your needs, budget, and timeline to determine if buying new or used is best for you.
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